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No. of Recommendations: 1
Mike,

You ask a shrewd question whose answer you can easily discover for yourself by grabbing an ETF, pulling its schedule of holdings, and then entering them --plus the ticker for the ETF-- at this website. https://www.portfoliovisualizer.com/asset-correlations

What you'll find is this. The composite is less volatile --using StvDev as an imperfect measure of volatility-- than many of its underlying. BUT TRADERS WANT VOLATILITY. What they DON'T want is DISORDERLINESS. Be it stocks or ETFs, you want be getting into and out of things that move a lot, up or down, not things that go sideways or kinda just stumble around AND you want things that aren't "frantic" or "chaotic" or that move too fast to be able to execute on. E.g., I hate trading the SPXL/SPXS pair, but the LABU/LABD pair is very friendly, with nice swooping curves.

Second question. What do you mean by 'short-term'? Under two minutes? Less than an hour? The sort of charts I'm trying to build are worthless for short-term trading. Then, what will serve you best is a bare chart, and often a tick chart instead of a longer aggregation. What you're looking for, and what you're trying to get yourself in synch with, is the rhythms of that specific market, so much so, you can sense when prices are stalling, which is when you want to be getting in or out. Back and forth. Advance and retreat. Thrust and parry. If you're trading short-term, you gotta be meaner and faster than your counterparty and constantly be "skating to where the puck is going to be".

And, frankly, short-term trading is a horrible thing to do to oneself and very hard to sustain. 30-40 minutes? Sure, that's fun. But the rest of one's time and money ought to be focused on longer-term plays, not the fluff and forth of what happens intraday.

How long is 'longer-term'? 3-5 days seems to me to a good time frame to focus on. The charts I build seem well suited to that. If the runup lasts longer, all the better. But eventually, prices stall and reverse, sometimes due to "news" or 'fundamentals' or macro events, and sometimes just because that's how markets work.

Suggestion. If you want to explore 'short-term trading', do so in an tax-sheltered account --so you won't have to deal with the IRS at year's end-- and make your bets small.

Arindam
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